The Unintended Impacts Of Not Paying Your Rent

March 30, 2020

The global COVID-19 pandemic has resulted in an unprecedented impact on our economy, with many businesses closing their doors and working from home, or ceasing operations entirely. This has generated a ripple effect of questions around an occupier’s obligations, most notably their requirement to continue to pay rent. Before you decide to skip out on your rent payment on April 1st it’s crucial to understand the consequences that will have.

Our experience with some of the largest institutional landlords in Canada has shown that rent relief and abatement discussions are not met with any eagerness on the landlord’s part, and many landlords, with institutional owners, have financial covenants, financing agreements and fiduciary obligations in place that preclude such renegotiation being available to all. Having said that, during these extraordinary times, landlords may offer some relief, even where there is no legal obligation to do so.

Since your business is legally bound to abide by the terms of the lease, it’s important to know that any non-payment of rent without agreement from the landlord may have unintended consequences for tenants. So what should you do? There are five steps that organizations should take to fully understand their current positions, your legal and financial obligations and the options available to you.

Kevin serves as Principal, Consulting Services. In this role, Kevin provides “enterprise” value to Cresa clients. He has a deep understanding of how properly leveraged corporate real estate strategically and significantly impacts an organization and its employee culture in addition to improved bottom line and top line revenues.

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